What to expect from Powell?
As I mentioned at the beginning of this week, besides the Initial Jobless numbers of every Thursday, we have 4 key data this week ahead of Powell's speech that needs attention. Housing data, Durable Goods Order, GDP, and PCE that includes Personal Income.
Monday and Tuesday's Housing data for both Existing and New Home Sales were promising, beat the market expectation and above the previous month. Yesterday also we had Durable Goods Orders that notwithstanding beating the estimates, decrease from a month earlier. Today we had GDP and Initial Jobless Claims, one missing and another one increased.
Checking the published data telling us that the US economy grew much faster and better than initial estimates, but with the support of huge stimulus and vaccination. US Gross Domestic Products in the second quarter rose by 6.6%, even if it is less than 6.7% of expectations, but it is more than 6.5% of initial estimates, telling us that economy is growing fast enough. In the first quarter, the US economy has grown 6.3%.
At the same time, we had the Initial Jobless number as well, which was missing the expectations again. According to data from the Department of Labor, in the week ended 21 August, we had 353K filled applications to receive the unemployment benefits, 4,000 more than a week ago which was revised down to 349K and 3,000 more requests from the market expectations. Continuing jobless on the other hand, fell slightly to 2.9 Million in the week ending 14 August.
Reviewing all key published data of the week by now, we can see mixed data that cannot tell us exactly what we have to expect from the coming months. This uncertain feeling has nothing more than to tell that it can be still early to have a definite opinion about economic recovery and still we need more evidence and numbers, to tell what is happening there.
With these mixed data and spreading the virus all around the globe, probably policymakers will be more cautious before taking any step forward and announce any new policies. So while we are bracing for tomorrow's Mr. Powell's speech, should not price too much on any new announcement, expect nothing to hear again that economy still has a long way to go and we are there as long as we feel it needs and as much as it takes.
By accepting this theory, we can expect more bulls to be seen as holding the current policy means that markets will have the current ultra-dovish policies long enough to take advantage of it. And we can see it in the bellow figure of DJI30.